One of the important activities that investment firms and banks do through their research divisions is evaluating the markets, analyzing financial statements of quoted firms, and forecasting the fair prices of their stocks, or the expected oil prices, interest rates, and the probable returns. In this regard, one of the most important reports is the latest Citigroup report on the Kingdom's oil consumption, which says it could become a net importer of oil by 2030. To say the truth, I didn't read the whole report, but only what has been written in local newspapers.

The report didn't come as a surprise for observers and followers of oil markets. Indeed, the Saudi government recognizes the increasing consumption of energy as well as the excessive production of oil. It works hard to find alternatives: It established King Abdullah City for Atomic and Renewable Energy two years ago to adopt alternatives to oil, such as nuclear, solar and wind power. However, it is important to know how investment firms adopt research hypotheses and develop researches in an attempt to understand the nature of these reports, as one colleague asked for my opinion on this topic.

In general, writers of such researches are financial analysts working in investment banks and investors. They adopt specific, well-known forecasting models, and easy, simplified theories, as they lack the precise specialization in each field. But some international investment banks allocate professionals in energy, industry, services, real estate, communications, etc.

Such researches and models aim to anticipate the future pilot indicators of price movements, consumption and production. They adopt theories and reasonable growth levels based on the historical growth levels and the projected growth of the population, as well as other specific factors concerning each individual industry.

Most often, they ignore government policies, the industry structural changes, and overlook the alternatives and technical change, as most of these researches assume that all other factors stay stable and consistent. So, their results come out closer to raise expectations and exaggeration.

However, they cannot be ignored as pilot indicators. And, in particular, one should pay attention to them in the short term, as they come out ultimately, from monitors of the markets, economies, and news on a daily basis. Those people have contacts with decision-makers in listed companies as well.

In markets of developed countries, those researchers get into meetings with executive departments, look into their strategies and action plans, and set out the latest developments in certain sectors as well as the factors influencing their performance. They also meet with government decision-makers at international conferences and press meetings to draw the best possible perception of a certain sector.

Therefore, one cannot ignore these reports that come instantaneous, keep pace with, and foresee future events in a manner that contributes significantly in changing the behavior of market dealers, positively or negatively.

So, demand and production levels change based upon this behavior of market dealers. This, in turn, forces governments to adopt decisions that interact with markets, although these reports came out lately.

The Kingdom will adopt, for example, energy alternatives. It intends to build 17 nuclear reactors to reduce consumption by 18 percent in 2030. Tremendous efforts are being made by the Public Authority for Electricity and Water to raise consumer awareness of energy and look into alternatives in the consumption of fuel and water.

I would like to draw the attention of those who focused on the Citigroup report that many writers in Al-Eqtisadiah and other newspapers wrote about these topics years ago, but nobody paid heed to them.

Similarly, the Saudi Electricity Company publishes press and guidance reports in the newspapers and on its website that are very accurate, and cautions in the same time of excessive consumption of energy and oil. But, in general, we are accustomed to pay attention to what is said outside, and interact more with it from the inside.

n Courtesy of Al-Eqtisadiah newspaper